Mgmt 300 Short Paper 2

Introduction

In today’s business environment, managers deal with heap of issues categorized by various complexities, both internally within the company and externally. When dealt such issues, it is up to the manager or supervisor in the situation to properly assess the problem and successfully originate a solution that best fits the situation. For example, a manager might have to assess how much product must be in the warehouse for certain peak seasons of the year and whether or not there should be an excess, is it feasible? Often times, managers are able to come up with efficient and effective solutions to such problems and business continues. However, it is important that we take a deeper look at how this solution was made and what rationale was used to solve the problem. The question stands, “How rational, are rational decision making processes within organizations?”. We can identify that indeed they may not be fully rational due to the various techniques that managers may use, or be influenced in using to make their decision.

Quasi-Rational Decision Making

When discussing rational thinking in a business environment, it is key to identify the constraints and variables that are involved with such situations by looking at boundless rationality. These constraints may influence the manager to approve a solution that is not ideal, however, was perhaps forced due to the possibilities of limited time, limited information, as well as a limited capacity to process this information. In any business, a manager is usually in charge of various departments and must have knowledge on specialties. However, a manager cannot be an expert in every field of their supervised activities. This represents the constraint of limited capacity to process information. The manager cannot always make the most ideal and perfect decision because they may not understand all the risks involved with that certain department, the analysis behind the problem, sometimes they may not even understand proper solutions for complex issues that arise and may have to outsource (Economist, 2009). The second ideology of boundless rationality that may stop an organization’s rational decision making process from being efficient, is limited information. Issues within organizations are given to managers in two ways, the manager discovers the issue through analysis or just through work, or the issue is escalated and brought to the manager. Almost always, there is never enough information about the cause of the problem, the capacity, the risks, the parties involved, the alternatives, and the accuracy. It becomes the manager’s task to find this information out. When an issue is brought to the manager, there may be an issue of tactic knowledge, where the issue may not be communicated well and instead must be dealt with through experience, and vice versa for explicit knowledge.

Another reason why I believe organizations may not be making very rational decisions is backed by the idea of satisficing. Originally coined by American scientist and Noble-laureate Herbert Simon in 1956, this idea states that as decision makers, we have the tendency to select the options that seem “good enough” rather than choose those that are optimal. An article from the Professional Education, Testing and Certification Organization International’s website states that “Satisficing is similar to rational decision making. The main difference is that rather than choosing the best option and maximizing the potential outcome, the decision maker saves cognitive time and effort by accepting the first alternative that meets the minimum threshold.” (Bauer, 2011). I believe this to be true of many organizations, due to poor result oriented promoting, managers are forced to create results and generate quick impact and turnover. In doing so, many can be influenced to make quick decisions that are not based off of logic and reasoning, but rather than a decision needs to made, that they only need to be “rational enough”. A real world example of this comes from a company called Nutrorim. Nutrorim encountered an issue when opening up a new product line called ChargeUp, a version of their line of sports drinks. After some time, they received input that there had been cases of gastrointestinal distress that may have been related to their product. This led to the leadership team recalling the product. However, after further analysis and investigation, the company discovered that the reported problems were unrelated to their product. Because of this, the brand and company got a huge blow to their income statements. (Bauer, 2011) This is a great example of how a company might think a simple recall of a product would be the best solution, when in fact it may have been more rational to investigate further. Nutrorim is a sports drink company and so a bad product would hinder their image, which may be the most important aspect of the company. This is why their decision making process may have influenced them to administer a recall rather than take the time to receive more information. This is another great example of the bounded rationality, where the company had limited time to make a decision as well as limited information.